2016 (6) TMI 1202 - AT - Income Tax

Assessment order passed u/s 143 (3)/153C - Held that - We are inclined to concur with the submissions of the Ld. AR that the impugned order of the Assessing Officer ostensibly passed u/s 143(3) of the Act should be considered to have been passed u/s 153C read with section 143(3) in view of the decision rendered by the Hon ble Delhi High Court in the case of Pr. Commissioner of Income Tax-2 vs Natural Products Bio- Tech Ltd. 2015 (9) TMI 1458 - DELHI HIGH COURT held that no addition can be made in the assessment being framed u/s 153A, when there is no incriminating material or assets seized during the course of search. The finding of photocopies in the possession of a searched person does not necessarily mean and imply that they belong to the person who holds the originals - Possession of documents and possession of photocopies of documents are two separate things - Decided in favour of assessee.

Summary

Issues involved:
1. Assessment year 2009-10 - Appeal against impugned order dated 12.03.2013 passed by Ld. CIT(A)-XXXI, New Delhi.
2. Transfer of case under section 127 of the Income Tax Act.
3. Revised return of income u/s 139(5) declaring increased income.
4. Surrendered additional income during search proceedings.
5. Treatment of debenture amount received from foreign company.
6. Disallowance of capitalization of interest on debentures to overseas investors.
7. Confirmation of assessment order under section 143(3) without approval under section 153C.
8. Admissibility of additional grounds of appeal.
9. Interpretation of statutory language for assessment order.

Analysis:

1. The appeal pertains to the assessment year 2009-10 against an order passed by Ld. CIT(A)-XXXI, New Delhi. The case involved a search and seizure operation under section 132 of the Income Tax Act, resulting in the transfer of the assessee's case to Central Circle - 12. The assessee filed a revised return of income u/s 139(5) declaring a higher income, including additional income surrendered during search proceedings.

2. The issue of treatment of a debenture amount received from a foreign company arose, where the assessee had received a significant sum and paid interest on debentures, which was capitalized in the cost of a hotel project. The AO raised concerns about the diversion of funds without charging interest, leading to disallowance of capitalization of interest paid to the foreign company.

3. The appellant challenged the assessment order under section 143(3) without satisfying the requirements under section 153C of the Income Tax Act. The appellant contended that the order should be considered as passed under section 153C read with section 143(3), citing precedents and interpretations of legislative intent.

4. The Tribunal, considering the arguments and relevant case law, held that the impugned assessment order should be deemed a nullity and quashed based on the decision of the Hon'ble Delhi High Court in a similar case. The appeal was allowed, and the assessment order was set aside as a result.

5. The judgment highlighted the importance of statutory interpretation and adherence to procedural requirements under the Income Tax Act. The decision underscored the significance of legal precedents and the need for clarity in the assessment process to ensure fair treatment of taxpayers.